NBA players are making a fortune from NFTs. UFC fighters may not be so lucky

<span>Photograph: Étienne Laurent/EPA</span>
Photograph: Étienne Laurent/EPA

In the last year, non-fungible tokens (NFTs) – effectively one-of-a-kind digital collectibles – have boomed in areas as varied as adult entertainment and the arts. Even sports leagues have started to take advantage of the NFT explosion.

So it makes sense that the UFC, a body that has never been slow to sniff out a quick profit, reportedly filed several new trademark applications indicating plans to launch a UFC-branded cryptocurrency, as well as an app for users to manage NFTs and other digital assets.

While the UFC’s decision to take advantage of the flourishing NFT ecosystem is unsurprising given its success across other sports leagues it also raises serious concerns about whether the world’s largest MMA promotion will use this as another opportunity to exploit its fighters in its pursuit of profit.

The UFC’s interest in NFTs is most likely due to the success of the NBA’s Top Shot NFT marketplace, which allows basketball fans to purchase video highlights from the league’s history. The Top Shot NFTs can be anything from a Kevin Durant three-pointer to a LeBron James dunk. Users can buy packs directly from Top Shot or trade and sell with other users in the mobile app. The NBA announced its licensing agreement with Dapper Labs, a blockchain game company best known as the creators of CryptoKitties, in August 2019. According to data provided by the league, there are around 460,000 NBA Top Shot collectors, who have made more than 4m transactions as of April 2021.

And make no mistake, this business makes money. The rarest Top Shot moments have sold for hundreds of thousands of dollars, including a LeBron dunk that sold for nearly $400,000 last month. According to reports, Top Shots made more than $230m between October 2020 and February 2021. Skeptics may wonder why a video of LeBron that you could find for free on YouTube is worth a small fortune, but the same questions could be asked about the value of most collectibles, from stamps to baseball cards.

Top Shots takes a 5% transaction fee on sales in their marketplace. That 5% is then revenue shared between Top Shots, the NBA, and its players union. This is good news for players, particularly those on lower wages: the money from that LeBron dunk was shared across the league, so a rookie on league minimum made just as much from it as the LA Lakers star did. On the other hand, the UFC – which is partnering with Dapper Labs’ Flow blockchain – is not obligated to split revenue with its athletes, as the fighters are independent contractors with no union to bargain for their rights.

Unlike the vast majority of sports leagues and organizations, where athletes receive anywhere between 47-50% of the sport’s revenue, the UFC has historically paid out between 16-19% of revenues to its fighters. In 2019, the promotion reported $900m in revenue, but only 16% was paid out to the UFC’s approximately 600 fighters.

The UFC’s stranglehold over its fighters led to a half-dozen former UFC fighters filing a $5bn antitrust lawsuit against UFC’s parent company, Zuffa LLC, in December 2014. The lawsuit charges Zuffa LLC with illegally acquiring and maintaining a monopoly over the MMA industry. It claims that the UFC used predatory practices and ran an illegal scheme to eliminate competition, which resulted in fighters being paid “a fraction of what they would earn in a competitive marketplace.”

Now, after more than six years of legal disputes, the suit has been certified with class-action status – a crucial step that could set a precedent for the UFC’s handling of its fighters. However, until the suit is concluded, it is unlikely that UFC fighters will have any increased bargaining rights or control over their likeness. This will likely impact the UFC’s deal with Flow, and the organization will not be obligated to share any of the revenue derived from selling NFTs of the fighters on their roster. In other words, if the UFC equivalent of that LeBron dunk – say a Conor McGregor knockout – sells for $500,000, the fighters will see none of the cash. Asked to clarify the situation, the UFC opted not to respond to The Guardian’s request for comment.

It is also worth noting that the UFC’s announcement that it plans to enter the NFT ecosystem coincided with the initial public offering (IPO) for its parent company, Endeavor. Led by Hollywood powerbroker Ari Emanuel, the company gained 5% in its first day as a public company. Through the IPO, Endeavor managed to raise $511.2m with a valuation of $10.8bn – a valuation that relied heavily on the UFC’s continued success as the rest of Endeavor’s entertainment sector suffered in the wake of global lockdowns.

Despite the fact that UFC fighters helped Endeavor stay afloat during the past year, it is highly unlikely that the entertainment company will give them a seat at the table when it comes to any future revenue sharing agreements.